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After Raising $45M, Digg Sells for Pennies on the Dollar

Digg founder Kevin Rose as he appeared on the cover of BusinessWeek in 2006, and in a remix of that cover today created by Twitter user @darth

The remains of social news sharing site Diggwere bought by New York-based incubator Betaworks on Thursday. Betaworks would not comment on the price it paid for the once high flying tech company. The incubator's founder, John Borthwick, will be CEO of what will become a reconstituted Digg.

The Wall Street Journal reported a price tag of $500,000, which amounts to pennies on the $45 million in venture capital Digg raised over as six-year-period from Marc Andreessen, Ron Conway, and venture firm Greylock Partners. Wired Gadget Lab writer Mat Honan summed it up in a tweet: "Digg just sold for .0005 Instagrams, or 1.25 Holopacs."

Digg's CEO Matt Williams refutes the price, saying that with stock considerations, reportedly worth several million dollars, Digg sold for "much more than $500,000," but did not offer a total value for the deal, reports the New York Times. In a blog post Williams says the sale was "a way to take Digg back to its startup roots."

Digg is a social news aggregator that lets users vote up popular stories, and down-vote ones they don’t like. The most popular stories appear on the Digg front page. It used to be one of the most fearsome traffic drivers on the Internet, but faltered with a redesign in 2010 that critics complained gave all the leverage to promote stories to publishers, and took it away from the community that had built the site's popularity.

Users started leaving in droves, turning to Twitter to find their news, or Facebook to share links with friends, rather than "Digging" a story. For all the competition that Facebook and Twitter represent, news and community site Reddit (owned by WIRED's parent company) is the clear usurper of the former Digg throne. The 7-year-old Reddit has captured many of Digg's users by building lively communities around topics such as photos, sports teams, and hobbies. Reddit surpassed Digg in traffic last December and has trounced the site ever since.

Digg's new owner, incubator and investment company Betaworks, has helped launch Bitly and Chartbeat. With the Digg assets, it plans to revamp Digg and boost the technology of Betawork startup News.me, a daily news aggregator. Venture capital firm Andreessen Horowitz is installing Williams as an entrepreneur-in-residence. The end for Digg did not come as a surprise, especially to its wunderkind founder Kevin Rose. Rose bailed on Digg in March 2011. One year later, he joined Google.